4-17. California's Unique Regulations and Challenges for Global Companies

California is known for having some of the most stringent and advanced environmental, health, and safety (EHS) regulations in the United States. Its unique regulations are often stricter than federal laws and frequently influence regulatory trends nationwide. For companies operating globally, compliance with California's regulations is a significant challenge, as failure to comply can lead directly to legal risks and brand damage.

1. Distinctive Regulatory Frameworks in California

A prominent example of an environmental regulation is Proposition 65 (Prop 65), which requires businesses to provide warnings about significant exposures to chemicals that cause cancer or birth defects or other reproductive harm. The list of regulated chemicals includes more than 900 substances. In the occupational health and safety sector, Cal/OSHA has its own regulations, setting more detailed and strict workplace safety standards than the federal OSHA standards. Additionally, California has implemented a cap-and-trade program for climate change mitigation and stringent vehicle emission regulations (CARB regulations).

2. Challenges Faced by Global Companies

Because California's regulations are exceptionally strict even within the U.S., a company's approach for other states may be insufficient. For example, Prop 65 warning requirements apply to exported products and products sold through e-commerce sites, affecting foreign manufacturers, including those in Japan. Furthermore, companies with facilities in the state, such as factories and distribution centers, may face penalties or risks of operational shutdowns if they fail to implement workplace safety measures that comply with Cal/OSHA. Global companies may find themselves with additional burdens, including the need for extra costs and human resources, especially in chemical management, occupational safety training, and environmental monitoring.

3. Key Points for Practical Compliance

• Continuous monitoring of regulatory information: The Prop 65 chemical list is updated several times a year, so a system for rapid information gathering is essential.

• Supply chain management: It is crucial to ensure that materials and raw ingredients do not contain any of the regulated substances by thoroughly obtaining certificates and Safety Data Sheets (SDSs) from suppliers.

• Collaboration with local regulatory authorities: Utilizing local law firms and consultants can enhance a company's ability to respond to audits from agencies such as Cal/OSHA and CARB.

• Alignment with global standards: Aligning with international standards such as ISO 14001 and ISO 45001 allows for efficient and uniform EHS management globally.

4. Conclusion

California's unique regulations are not only a factor in the U.S. market but also influence international regulatory trends. It is essential for global companies to view California as a "leading indicator" of regulations and to prepare for potential regulatory tightening worldwide by addressing Prop 65 and Cal/OSHA. Going beyond mere compliance and using regulatory adherence as an opportunity to enhance a company's brand and market competitiveness will lead to a sustainable growth strategy.